Sabic net loss widens on lower prices, demand amid COVID-19

MOSCOW (MRC) -- Sabic (Riyadh) has announced its financial results for the first quarter, reporting a net loss of 950 million Saudi riyals (USD250 million), according to Chemweek.

This compares with a net profit of SR3.41 billion in the year-earlier quarter and a net loss of SR790 million in the fourth quarter of 2019. The net loss is mainly attributed to lower average selling prices and to impairment provisions in certain capital and financial assets amounting to SR1.1 billion, including the suspension of production of Ultem polyetherimide polymers at Sabic’s Cartagena, Spain, site.

EBITDA was down 44% to SR5.7 billion, and income from operations was 92% lower at SR480 million. Revenue contracted 18% to SR30.83 billion. Some nonrecurring charges, a challenging product-pricing environment, and lower demand underpinned by the coronavirus disease 2019 (COVID-19) hurt first-quarter results, the company says.

Announcing the results in Riyadh today, CEO Yousef al-Benyan says the situation is difficult. "Product prices remain challenged with no improvement in the supply/demand balance for key products in the first quarter of 2020 compared to the previous quarter. This was further aggravated by COVID-19 becoming a global pandemic and the significant decline in Brent price towards the end of the quarter."

Sabic has decided to cut its capital expenditure (capex), Benyan says. "Sabic is committed to capital discipline and maintaining a strong balance sheet and has suspended all capex, except nondiscretionary capex for safe and reliable operations and late-stage projects. We are confident in the resilience and strength of our operations and supply chain, and opportunities [that] exist for long-term growth."

Benyan says in the earnings briefing that Saudi Aramco has committed to complete the acquisition of a controlling stake in Sabic by the second quarter and he does not see anything that changes this timeline. Separately, Sabic purchased additional shares in Clariant, increasing its stake to 31.5% from 24.9%. The transaction is pending regulatory approvals. Sabic says the investment is part of the company’s growth strategy in specialties and is designed to support its aim of achieving a leadership position among global specialty players.

In its outlook for 2020, Sabic says the global GDP growth rate is expected to be negative, primarily due to the impact of COVID-19. “While we have seen some improvement in business activity in China, a deterioration in other parts of the world, influenced by lockdowns, will impact demand and market sentiment in the second quarter of 2020 and potentially later in the year. This, along with an oversupply in our key products, will put further pressure on product prices and margins,” Sabic says.

Sabic has also provided details of performance by reporting segments. Petrochemicals and specialties, the company’s largest segment, reported a 94% drop in income from operations to SR330 million compared with the first quarter of 2019. EBITDA was down 44% to SR5.07 billion and revenue 18% lower at SR26.59 billion. The agri-nutrients segment reported a 38% drop in income from operations to SR360 million, with EBITDA down 28% to SR560 million and revenue 19% lower at SR1.47 billion.

As MRC wrote before, Sinopec SABIC Tianjin Petrochemical Co. (SSTPC), a 50-50 joint venture of Sinopec and Sabic, has shut its naphtha cracker in Tianjin on 1 May 2020 for routine maintenance work. The cracker is expected to remain off-line until early July 2020. The naphtha cracker is designed to produce 1 million tons/year of ethylene, which supplies several local buyers in the Tianjin area. Besides, the company is also planning to expand its cracker capacity to 1.3 million tons/year in 2021.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 557,060 tonnes in the first three month of 2020, up by 7% year on year. High density polyethylene (HDPE) and linear low density polyethylene (LLDPE) shipments rose because of the increased capacity utilisation at ZapSibNeftekhim. Demand for LDPE subsided. At the same time, PP shipments to the Russian market was 267,630 tonnes in January-March 2020, down 20% year on year. Homopolymer PP and PP block copolymers accounted for the main decrease in imports.

Saudi Basic Industries Corporation (Sabic) ranks among the world"s top petrochemical companies. The company is among the world"s market leaders in the production of polyethylene, polypropylene and other advanced thermoplastics, glycols, methanol and fertilizers.
MRC

MOSCOW (MRC) -- Austrian energy group OMV sees hope for a recovery in oil prices in the second half of 2020 helped by increased fuel demand and output cuts by producers such as Saudi Arabia, reported Reuters with reference to its chief executive's statement.

The spread of the coronavirus has knocked global demand and weighed on crude prices and oil companies’ profits.

But the willingness of producers such as Saudi Arabia and Norway to drastically cut output shows oil prices have a chance to return to a reasonable level, OMV CEO Rainer Seele said.

"We therefore expect the oil price to gradually recover in the second half and to average USD40 for the year," Seele said in an interview with Reuters.

Gasoline and diesel consumption in Austria halved in April, but was back at 60% after all shops were allowed to reopen in early May and has hit 65% in the past few days, he said.

Austria was one of the first countries in Europe to close shops and restaurants and urge people to stay at home, but has also been early to ease lockdown measures.

OMV is curbing its oil production in the United Arab Emirates and in Norway to meet agreed quotas but it does not expect any production shutdowns, Seele said.

"I also do not see any major production interruptions in our refinery business."

OMV benefited from the fact that it has transferred its European refineries from predominantly fuel refineries to jet fuel and petchem units, allowing it to shift production from low-demand kerosene to sought-after plastics.

In particular, demand for polymers used to produce protective gear and sterile packaging has risen significantly.

"As a result, OMV has an above-average capacity utilisation of more than 80% in Europe," Seele said.

Rivals including BP and Total are currently operating refineries at 60-70%.

Confronted with investor criticism of doing less than rivals to limit global warming, Seele said he will announce concrete climate targets this summer.

To cover its energy consumption, OMV would rely to a large extent on renewable sources in the future.

"But we won’t build up (renewable energy) as a business unit, instead we will move towards high value chemical products and recycling."

Seele said he plans to decide on the sale of OMV’s nearly 300 German filling stations by year-end after more than 20 parties expressed interest.

A decision on its pre-coronavirus crisis proposed 2019 dividend of 2.00 euros per share will be made in the second half of the year.

"Once we have seen the second quarter and have an idea regarding the third quarter, then the management board will meet again and discuss."

As MRC informed earlier, Austria’s OMV AG is in talks to buy a USD4.68 billion stake in Borealis AG, a potentially record-breaking acquisition that would shift the state-controlled energy company’s focus to petrochemicals. Taking over the maker of polyolefins, base chemicals, and fertilizer would accelerate Chief Executive Office Rainer Seele’s move toward higher-value, lower-emission oil products. That rebalancing could be further amplified if OMV helps fund the purchase by selling some upstream oil assets or gas pipelines. OMV may buy a 39% stake in the affiliate from Abu Dhabi’s Mubadala Investment Co., it said in a statement in early March 2020. That would increase its holding in Borealis to 75%, while Mubadala would maintain a 25% stake. The emirate’s wealth fund also owns a quarter of OMV and is discussing joint investments in Abu Dhabi and Asia.

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 557,060 tonnes in the first three month of 2020, up by 7% year on year. High density polyethylene (HDPE) and linear low density polyethylene (LLDPE) shipments rose because of the increased capacity utilisation at ZapSibNeftekhim. Demand for LDPE subsided. At the same time, PP shipments to the Russian market was 267,630 tonnes in January-March 2020, down 20% year on year. Homopolymer PP and PP block copolymers accounted for the main decrease in imports.
MRC

MOSCOW (MRC) -- Gazprom Neft’s Omsk Refinery has completed a major upgrading of its berthing facilities in time for the opening of the river-navigation season, said the company.

About 300,000 tonnes of diesel, gasoline and aviation fuels produced by the Omsk Refinery will be sent to ports in the Ob—Irtysh river basin this summer and autumn. The larger part of river shipments to customers in the Yamalo-Nenets and Khanty-Mansiysk Automous Okrugs comprise winter and Arctic diesel fuels essential to ensuring the continuous operation of specialist equipment.

In addition to which, every year the Omsk Refinery facilitates shipments of aviation fuels needed by airports — Anadyr, Pevek and Kereveem — in the Chukotka Autonomous Okrug, with shipments being made along the Irtysh and Ob rivers and, subsequently, along the Northern Sea Route.

Thanks to work on modernising technological pipelines and mooring equipment, efficiency in ensuring uninterrupted shipments to oil tankers via the Omsk Refinery’s berthing facilities will increase. The company has successfully implemented a system for measuring oil volumes shipped to oil-carrier vessels, ensuring the full accuracy of fuel shipments.

“The Gazprom Neft Omsk Refinery is constantly developing technologies for ensuring the high-precision, environmentally friendly shipment of oil products. In improving river shipments during the navigation season the business is effectively acting as a guarantor in ensuring the stability of fuel supplies to customers in the remote northern areas of the West Siberian Federal Okrug.”

As MRC informed earlier, in 2019, SIBUR and Gazprom Neft have consolidated 100% of the authorised capital in Poliom, a polypropylene plant in Omsk. Sibgazpolimer, a joint venture of the two companies, has signed an agreement to acquire a 50% stake in Poliom from the Titan Group.

Ethylene and propylene are feedstocks for producing PE and PP.

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 383,760 tonnes in the first two month of 2020, up by 14% year on year. High density polyethylene (HDPE) and linear low density polyethylene (LLDPE) shipments increased due to the increased capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market were 192,760 tonnes in January-February 2020, down by 6% year on year. Homopolymer PP accounted for the main decrease in imports.

Gazprom Neft in Russia owns the Omsk Refinery and the Moscow Refinery, with refining capacities of 20.89 and 12.2 million tons of oil per year, respectively. In Serbia, the company owns the NIS processing complex, which consists of two plants (in Panchaevo and Novi Sad). The maximum capacity of the two enterprises exceeds 7 million tons of oil per year. Gazprom Neft also owns shares in YANOS (15 million tons) and the Mozyr Oil Refinery (Belarus, 14 million tons).

MRC

MOSCOW (MRC) -- PBF Energy, the fourth-largest U.S. oil refiner by capacity, is holding processing near 70% of throughput even as more states relax stay-at-home orders, boosting demand for motor fuel, executives said, as per Hydrocarbonprocessing.

The gasoline crack spread RBc1-CLc1, which drifted negative in March as the coronavirus pandemic sharply cut air and road travel, has recovered to USD11.42 per barrel this week. However, fuel demand is off 23% in the United States over the last four weeks.

“We are just not going to do what everybody expects refiners to do, see an improvement in gasoline cracks and say, ‘The Holy Grail, there it is, let’s ramp up, let’s run,’” Chief Executive Thomas Nimbley said on an earnings call on Friday. “This thing is not over." PBF’s shares were up nearly 4% at USD9.62 on Friday. They are off nearly 70% year to date.

At the start of the year, PBF planned to run about 950,000 barrels of oil per day (bpd). But it now expects to run in the 650,000 to 750,000 bpd range, executives said on the call. Demand for gasoline has inched up and gasoline production has climbed for a third straight week to 7.5 million bpd, according to the latest data from the Energy Information Administration.“We’re not planning to get back to where things were prior to the pandemic, but I do believe at this point, we are starting to see green shoots related to a recovery,” Nimbley told investors.

PBF Energy joined rivals such as Marathon Petroleum in shifting production to gasoline after initially maximizing diesel output during the early surge of coronavirus cases. With COVID-19 cases rising in South America, exports are being reduced, Nimbley said.

PBF reported a quarterly loss in the first quarter on a USD1.28 billion inventory writedown amid the sharp decline in fuel demand. The company posted an adjusted loss of USD1.19 per share, wider than analysts’ average estimate of a USD1.04 per share loss, according to IBES data from Refinitiv.

The loss reflected refinery operating expenses that were higher than analysts expected and weaker margins from a turnaround at its Toledo, Ohio, plant, financial services firm Tudor Pickering, Holt & Co wrote in a note on Friday. PBF said it cut its 2020 planned capital expenditures further by a total of more than USD350 million, from its previous estimates of USD240 million.

As MRC wrote before, US refiner PBF Energy has completed its acquisition of Shell’s 157,000 bbl/day Martinez refinery near San Francisco, California. The USD1bn deal, agreed in June 2019, was completed effective 1 February 2020.

Besides, in late March 2020, PBF Energy Inc said it was operating its refineries at minimum rates, with throughput about 30% lower than the refiner’s expectations, as coronavirus-driven travel curbs hit fuel demand.

We also remind that Shell Singapore restarted its naphtha cracker in Bukom Island in early December 2019, following a two months maintenance shutdown since the beginning of October 2019. Thus, this cracker was taken off-stream for the turnaround on 1 October 2019. The cracker is able to produce 960,000 tons/year of ethylene and 550,000 tons/year of propylene.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 215,390 tonnes in the first month of 2020, up by 23% year on year. Shipments of all grades of high density polyethylene (HDPE) and linear low density polyethylene (LLDPE) increased due to higher capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market were 127,240 tonnes in January 2020, up by 33% year on year. ZapSibNeftekhim's homopolymer PP accounted for the main increase in shipments.
MRC

MOSCOW (MRC) -- A record volume of diesel is set to reach Europe from the East in May after lockdown measures due to coronavirus left refiners in Asia and the Middle East with huge excess volumes of fuel, reported Reuters.

Refineries around the world have cut output in recent months in response to the unprecedented drop in demand due to movement restrictions imposed by governments to limit the spread of the coronavirus epidemic.

But that may prove insufficient after countries including India extended lockdown measures and others, including many European countries, recover activity at a slow pace, traders and analysts said.

The weak demand led to a rise in global diesel stocks and has put heavy pressure on profit margins for converting crude oil into diesel which last week hit an 11-year low below USD5 a barrel, according to Reuters calculations.

"Cutting refinery runs further means shutting units. It is much harder for refiners to make that decision but it will have to happen," a source at a European refiner said.

Over 3 million tonnes of diesel are set to arrive in Europe in May, up from a previous record of 2.8 million tonnes in June last year, according to Refinitiv data.

The sharp rise in fuel exports from Asia comes after China’s refineries cranked up operations in April following the easing of lockdown measures were eased.

Oil demand in the world’s top energy consumer is however recovering slowly, leading to higher exports from China.

The collapse in fuel demand initially hit jet fuel and gasoline the hardest, while diesel refining margins, or cracks, held well due to ongoing industrial activity.

With diesel accounting for around 50% of global refinery output, plants must now prepare to shut down crude distillation units, Vienna-based consultancy JBC Energy said in a note.

"Diesel cracks only last week started to plumb new record lows - this difference in timing in our view doesn’t signify a sudden drop off in diesel demand, but is rather the primary signal to reduce crude distillation."

As MRC informed previously, global oil consumption cut by up to a third. What happens next in the oil market depends on how quickly and completely the global economy emerges from lockdown, and whether the recessionary hit lingers through the rest of this year and into 2021.

Earlier this year, BP said the deadly coronavirus outbreak could cut global oil demand growth by 40 per cent in 2020, putting pressure on Opec producers and Russia to curb supplies to keep prices in check.

We remind that, in September 2019, six world's major petrochemical companies in Flanders, Belgium, North Rhine-Westphalia, Germany, and the Netherlands (Trilateral Region) announced the creation of a consortium to jointly investigate how naphtha or gas steam crackers could be operated using renewable electricity instead of fossil fuels. The Cracker of the Future consortium, which includes BASF, Borealis, BP, LyondellBasell, SABIC and Total, aims to produce base chemicals while also significantly reducing carbon emissions. The companies agreed to invest in R&D and knowledge sharing as they assess the possibility of transitioning their base chemical production to renewable electricity.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 557,060 tonnes in the first three month of 2020, up by 7% year on year. High density polyethylene (HDPE) and linear low density polyethylene (LLDPE) shipments rose because of the increased capacity utilisation at ZapSibNeftekhim. Demand for LDPE subsided. At the same time, PP shipments to the Russian market was 267,630 tonnes in January-March 2020, down 20% year on year. Homopolymer PP and PP block copolymers accounted for the main decrease in imports.
MRC